NZDUSD has been on a strong downtrend in the past few weeks but price is pulling up to test a resistance level on its 1-hour time frame. Price is trading around the descending trend line connecting the recent highs and this resistance area lines up with the 200 SMA, which has held as a dynamic inflection point in the past.
RSI is on the way down, suggesting that sellers are taking control of price action and could push the pair to the previous lows at .6620. Stronger selling pressure could lead to a break of these lows and a move towards the next support around .6500.
Meanwhile, stochastic is pointing up, indicating that the correction is still taking place. A break above the rising trend line could lead to a much larger pullback, possibly until the area of interest around .6800, before the pair resumes its longer-term selloff. For now, the 100 SMA is below the 200 SMA, which means that the path of least resistance is to the downside.
Earlier today, Australia reported a stronger than expected employment figure for June, allowing risk appetite to return to the markets. This was followed by a slight pickup in Chinese stock indices, possibly due to the halt in trading activities in some major exchanges and the injection of a 260 billion CNY loan from a government-owned entity.
The latest FOMC minutes indicated that most policymakers weren’t inclined to hike interest rates just yet, due to the ongoing concerns about Greece and challenges to domestic growth. Future policy decisions could continue to carry more cautious remarks, as the June meeting hasn’t included the disappointing June NFP figure and the increased financial risks from Greece and China.
Updates from Greece could continue to drive risk flows, with weaker risk appetite likely to allow NZDUSD to resume its selloff.
By Kate Curtis from Trader’s Way